There exist two major solutions for face-to-face payments today—cash and plastic cards. In Japan and in some pilot trials in a few other countries it is also possible to make wireless face-to-face payments with the mobile phone. In Japan this system has been developed by a joint venture between NTT DoCoMo and Sony. The system is called Mobile FeliCa and is quite widely used. Mobile FeliCa is also possible to use for transportation payments, i.e. the phone is just swiped over a scanner at the entrance to the means of transportation.
The plastic cards can be divided into two categories—cards with magnetic strip only and cards with an integrated circuit (and sometimes a magnetic strip as well), so called smart cards. Today the magnetic strip is by far the most widespread plastic card solution, but it is not as secure as the smart card solution. There are some problems with the existing solutions.
Concerning plastic card, one plastic card for each application is needed. This often implies that your wallet is overflowed with plastic cards or that you left the card you need at home. One PIN-code to each card is often needed. Many users have difficulties to remember all the different PIN-codes. To be able to use Wireless payments with a mobile phone, retailers need to invest in a new POS (Point Of Sales) system (new wireless payment-enabled scanners) to be able to offer wireless payments. A handset which enables wireless face-to-face payments is also needed. For the solutions available today (e.g. Mobile FeliCa) this implies the need for a mobile phone with special HW and SW. If the mobile phone is not working for some reason (e.g. no battery left), it is not possible to pay. It is not possible to use the wireless payment solution at all retailers. This implies that the users will still need all the “old” plastic cards in the wallet and it will be difficult to get over the chasm between the early adopters and the early majority pragmatists. If the mobile phone is used for transportation payment this means that the user either has to have a headset or interrupt an ongoing call to be able to enter the means of transportation.
In the smart card case one card per application is still needed, i.e. the number of cards in the wallet does not decrease by using smart card. There are today a lot of services where the consumer needs a card. Payment is one example. There are also all kinds of member cards, ID cards, etc. The wallet could easily be quite full.
The advantage of smart cards for the customers is not very obvious (mainly security). This slows down the transition process.
A new POS system is needed. At the moment rather few retailers accept smart cards which means that the customer interest for such a solution is quite weak—This, in turn, implies that the retailers lack incentive to invest in such equipment.
Cash could be inconvenient and not so secure. The user needs a lot of cash in the wallet and he has to get the cash from either an ATM or from the bank.